FEM logo
Fund EcoMarket

the sustainable, responsible and ethical investment information hub

Name: Sustainability Themed funds

Investment funds which focus on sustainability related issues when making investment decisions

Brief description of Style

Sustainability Themed funds focus on sustainability related issues and opportunities, such as major social and environmental shifts, as part of their investment strategy, often alongside ethical criteria.

SRI approach applied

Fund managers select companies that fit within their published investment themes and typically favour well run, forward looking, longer term focused, sustainably managed businesses.

Fund managers in this Style generally select companies with sound environmental, social and governance strategies, often favouring those that are helping to enable the shift towards sustainable business practices and lifestyles (‘solutions companies’).  Some funds invest more significantly in larger, blue chip companies that are leaders in their field work in terms of embedding sustainability into their operations (‘best in sector’).

Some sustainability funds are starting to measure the positive environmental and social impacts that they are helping to deliver through positive investment selection.

The ‘Policy’ and ‘Features’ filters on Fund EcoMarket help to explain these areas further.

SRI Issues

Fund managers generally look for companies that have a positive impact on society as well as the environment.

Relevant issues include the management of climate risk, responsible use of resources, good employee and stakeholder relations and addressing long term environmental challenges for example through the development of new technologies or ways of working.

Variation across Style segment

Fund aims, approaches, investment strategies and resources vary. Strategies vary.  Some fund managers focus on ‘best in sector’ companies across most industries whereas others focus on specific themes such as climate change (specifically – helping to keep global temperature increases below the internationally agreed +1.5-2c degrees), resilience, health and wellbeing or sustainable transport.

Some funds invest mostly in larger companies whereas others will focus on smaller, newer companies, most however combine both (in varying degrees).

Some explicitly avoid certain areas (such as avoidance of armaments and tobacco companies), however this is often used as a way to clarify where they will not invest in order to reassure investors (as such sectors are unlikely to fulfil the positive selection criteria of a Sustainability themed fund).

Some of these funds, particularly those with in-house expertise, include Responsible Ownership strategies and actively use share ownership to encourage more sustainable business practices.

Impact on investment strategy

Fund managers invest in companies that are expected to succeed as a result of the way they deal with key environmental and social challenges, risks and opportunities.  They will, for example, aim to hold companies that are expected to benefit from the raising of standards across areas such as climate risk, resource constraints, employment practices and board structure.

Some of these funds aim to invest in most investment sectors (ie types of business), only avoiding those that are deemed to be inherently unsustainable.  This can help be helpful when market conditions change.  Others specialise in a more concentrated range of companies, in line with their published themes – which will be helpful when those areas prosper.

Who is this Style most likely to appeal to?

Ideal for investors who are looking to benefit from, support or encourage companies that understand sustainability related issues and reflect this through the way they operate.

Associated Styles

Some of these funds have much in common with Balanced Ethical and Environmental Themed funds.

Associated jargon

Sustainability, environmental – fund names often indicate taking a responsible view on the future.

Providers

Fund providers include established and newer market entrants.

 

 What is Sustainability?

Commonly used explanations of sustainability refer to, or are variations of, the following:

‘…meeting the needs of the present without compromising the ability of future generations to meet their own needs.’

Source: The Brundtland Report 1987

 

Sign Up to our Newsletter

If you are a Financial Services Industry professional you can sign up for our newsletter

Click Here

Latest News

‘Ethical Tipping Point’- Investment Life & Pensions Moneyfacts article
July 12, 2019

For a great overview of the SRI / ESG / Ethical fund market you might like to take a look at this month’s Investment Life and Pensions Moneyfacts deep dive article – attached here  – which I am delighted to be quoted in,  alongside our good friends at EdenTree, King & Shaxson – and survey […]

Media release: Use of Fund EcoMarket trebled
July 9, 2019

Media release 9 July 2019 Use of the Fund EcoMarket (SRI) fund tool has trebled over 12 months – with users indicating growing interest in both sustainability and ethical issues. Figures released today by SRI Services point to rapidly growing interest in environmental, social and ethical investment in the retail (individual) investment market. Use of […]

UK launches Green Finance Strategy & Green Finance Institute
July 3, 2019

The ever increasing flow of activity in our area has accelerating further this week with the launch of the Government’s Green Finance Strategy ‘Transforming finance for a Greener future’ and the launch of the BEIS and Corporation of London supported  ‘Green Finance Institute’. (2 July 2019). Both are greatly welcome initiatives and we look forward […]